Sales and business risks
Market-specific operational models are necessarily applied to sales of pharmaceuticals. The traditional way of maintaining an extensive network of sales representatives requires substantial fixed costs. Orion’s business operations in Europe are based on its own sales network, and sales elsewhere in the world mainly through partners. During 2022, Orion continued its geographic expansion to two new markets in Southeast Asia and Pacific region, Australia and New Zealand.
This structure is intended to optimise available resources and risk-bearing capacity, in view of the input required for worldwide marketing of own new proprietary products. In some markets, certain product categories are only sold to insurance companies or hospital procurement organisations, based on bidding.
Where Orion has its own sales organisation, a positive development of sales is required to maintain the profitability. This generally requires a broad enough product range.
Orion constantly monitors and acts responsibly in accordance with ethical marketing regulations and practices in different countries. Their obligations are incorporated into internal guidelines and regular training is provided to sales representatives.
Risks associated with pharmaceutical production
The manufacturing of pharmaceutical products is subject to regular inspections by the authorities. Pharmaceutical products must be safe, efficacious and compliant with all quality requirements. To comply with statutory requirements, in pharmaceutical production close attention must be paid to various safety and quality risks.
Adequate quality of pharmaceuticals is ensured through systematic, comprehensive management of operations covering all factors with direct and indirect impact on the quality of the drugs. The operations are managed by comprehensive instructions and adequate control of materials and products before and after production.
Orion's broad product range and wide supplier network may cause risks to the delivery reliability . Authorities and key customers in different countries undertake regular and detailed inspections and audits of Orion’s manufacturing sites. Should some inspection or audit outcome lead to significant corrective actions it may at least temporarily have effects that decrease delivery reliability and increase costs. This risk is, however, mitigated by continuous improvement and regular audit program by Orion. Orion’s product range also contains products manufactured by other pharmaceutical companies and products that Orion manufactures on its own but for which other companies deliver active pharmaceutical or other ingredients. Possible problems related to the delivery reliability or quality of the products of those manufacturers may cause a risk to Orion’s delivery reliability. Also the single channel system for the distribution of pharmaceuticals, which is in use in Finland, in which Orion’s products are supplied to customers through a single wholesaler, may also pose risks for the reliability of supply.
Legal, intellectual property rights and regulatory risks
The pharmaceutical sector is subject to some special regulations and close regulatory control by authorities. Pharmaceutical manufacture, distribution and research require licences from authorities. The pharmaceutical sector is also overseen by the competition authorities. Orion has clear policies and principles for its operations that ensure compliance with these regulations.
Intellectual property rights are inherently of crucial importance to the pharmaceutical sector. To protect Orion’s position, the patent situations of its products available for sale and in the pipeline are continuously monitored worldwide. This is done to ensure the rights to products developed by Orion can be defended and to prevent Orion itself from infringing patents or other intellectual property rights of others.
Patent protection is nevertheless of limited duration, and the expiry of patent protection on an important product can have a negative impact on the Orion Group’s operations, financial position or operating results. Nor does Orion have guarantees that patent protection will be obtained for new products in the pipeline to the desired extent or that the authorities will grant the marketing authorisations required for the products.
Product liability risks
As explained in the description of research and development risks above, the launch of a new proprietary drug in the market is preceded by extensive phased research that delineate the drug's pharmacological properties, such as its efficacy and safety. Marketing authorisation issued by drug authorities is required to start sales and marketing of a drug.
The adverse effects of a drug are monitored as required by the authorities even after the launch of the product. Through the trials and pharmaceutical production methods described above as well as based on safety reports received from the market, Orion strives to ensure that its products have no such unreasonable risks for patients in relation to the benefits of the drugs that might lead to liability or withdrawal of a product from the market.
To cover for the financial impact of product liability risk, the Orion Group’s products and operations are insured through operational and product liability insurances that also covers clinical studies. The purpose of the insurance is to provide cover for any liability for damages on the part of the policyholder. As is customary in insurance terms, this protection is limited as regards potential payout, for example. Certain products and active pharmaceutical ingredients are also excluded from the cover, some of which are included in Orion’s operations. Nevertheless, they are not estimated to increase Orion’s product liability risk materially.
Risks of damage
In addition to statutory insurance, Orion has property, business interruption and liability insurance to cover such risks of damage as are deemed to be material and limitable through insurance.
Corporate safety risks
Orion’s Corporate Governance Manual includes the Group’s corporate safety guidelines. The objective of the Group’s corporate safety policy is to ensure the uninterrupted continuation of operations, the safety of people, the protection of property and the environment against damage, and the adequacy of the measures relating to data protection and information security. The corporate safety guidelines set out the principles for corporate safety activities, and also cover guidelines for crisis management. In addition to guidelines, the data protection policy includes the objectives, key principles and responsibilities for data protection. The information security policy includes the objectives, key principles and responsibilities for information security.
Information is an essential part of Orion’s immaterial capital. For collecting, handling, storage and transmitting data, Orion uses efficient, safe and reliably functioning information systems that, for their part, secure the performance and the continuity of the Group’s operations. With compliant information systems, Orion also manages its pharmaceuticals business-specific obligations to secure the availability of its medicinal products, pharmacovigilance, and the reliability of drug related information.
The information or cyber security risk materialises if the information or the information system is not at the right persons’ disposal, the information has unintentionally or maliciously changed or ended up in the possession of outsiders. Orion manages the risks concerning information and information management systems and information and cyber security by means of regular risk assessments, protection of operational premises and data systems, by practices which strengthen information and cyber security and by ensuring the employees’ awareness of the risks and threats concerning information and cyber security.
Environment, social matters and personnel risks
The Group’s environmental, occupational health and occupational safety (EHS) guidelines define procedures and responsibilities for predicting, preventing and identifying deviations and exceptional situations causing possible harm. In addition, the guidelines define how to identify, assess, deal with and manage the risks of these situations. Management of EHS matters is monitored through annual internal audits. Operations are continuously improved by identifying development objectives. The management of sustainability issues, including the management of EHS risks, are also part of our supplier and partner selection and management practices.
Orion’s most significant environmental impacts arise in the consumption of raw materials, energy and water; emissions into the air and wastewater; and waste volumes arising from the operations. Annual development measures are defined for impacted areas, and the progress of these measures is monitored among other things by measuring emissions, waste volumes and resource use. All Group’s production plants have the valid environmental permits required for operations.
The Company's objective is to improve safety at work, keeping in mind that incidents and accidents are among the key social and human resources risks. The Company works continuously to prevent safety incidents and accidents and to further promote a safety culture, for example through comprehensive training, regular audits and by encouraging people to make safety observations.
Risks associated with the environment, social issues and personnel can typically lead to damage to the Company’s reputation. Besides risk management, the Company communicates in a way that is reliable, transparent, comprehensive and timely to avoid reputational risk. Systematic communication on both positive and negative matters also makes predictive action and learning from incidents possible.
Risks associated with the prolonged COVID-19 pandemic
Even though the worst pandemic impacts were seen milder during 2022 than in 2021, many areas of Orion’s operations were still impacted directly or indirectly of the prolonged and fluctuating pandemic. Orion’s personnel were able to continue their work more on site on a more or less normal mode and without any major interruptions, and the logistics chain functioned also well though with increasing cost base.
COVID-19 pandemic still caused some availability challenges for sourcing raw materials, semi-finished and final dosage form products. Orion managed to mitigate risks by increased inventories without jeopardizing the final service level to the customers. COVID-19 pandemic continued to impact auditing programmes with restrictions in certain geographical areas. Some of the audits to our suppliers and partners in 2022 were conducted remotely. Similarly, some of the audits of Orion’s operations were conducted remotely.
Product procurement and corporate acquisition risks
Orion endeavours to expand its operations by purchasing from other pharmaceutical companies or in-licensing products that are under development or already available in markets, or possibly by acquiring other pharmaceutical and biotechnology companies. In carrying out such projects, Orion strives to observe due care and diligence and to utilise both internal and external expertise in the planning and implementation phases, as well as when integrating acquired operations within the overall business.
Product procurement and possible corporate acquisitions can involve customary corporate acquisition liabilities or risks as well as other liabilities and risks connected with the nature and value of the purchased assets.
Orion’s success depends on the competence of its executive management, R&D staff and other personnel. Human resources management strives to promote well-being at work and continuous improvement of competence and the workplace. Orion’s success also depends on the Company’s ability to recruit, develop, train, motivate and retain professionally skilled personnel.